* Nikkei pares gains; on track for best yearly rise since
* Dollar underpinned against rivals by rising U.S. yields
* China central bank injection calms some funding fears
* Gold back below $1,200 on U.S. inflation data, Fed taper
By Lisa Twaronite and Wayne Cole
TOKYO/SYDNEY, Dec 24 Asian markets took cheer on
Tuesday after Wall Street rang up more records and upbeat U.S.
spending data burnished the outlook for the global economy, with
Japan's Nikkei hitting a 2013 high after Tokyo markets opened
following a holiday.
Tokyo's Nikkei ended up 0.1 percent, posting its
highest closing level in six years for the third session in a
row. Earlier, it topped the 16,000-mark driven by buying from
long-only investors after Wall Street marched upwards. Japan's
benchmark was up more than 50 percent this year, on track for
its best annual rise since 1972.
"Hedge funds are pretty quiet. A lot of them have closed
their books for the year, so if hedge funds are quiet there is
really no shorting going around in the market at the moment," a
trader at a European bank in Tokyo said.
The Australian market added 0.7 percent in a
holiday-shortened session, while MSCI's broadest index of
Asia-Pacific shares outside Japan was up 0.4
Investors also kept a wary eye on China's benchmark money
market rate, after rates in the interbank market spiked to their
highest level since June in recent days due partly to seasonal
factors that increase banks' demand for cash near the end of
The People's Bank of China injected funds through normal
channels for the first time in three weeks, but traders warned
that conditions remained tense.
"The relief is quite palpable after the cash injection by
the PBOC today," said Jackson Wong, Tanrich Securities
vice-president for equity sales. "But everything is now very
short term, we are at quarter-end and funding needs are high."
The injection helped Hong Kong recover from lows hit this
week. Hong Kong's Hang Seng Index rose 1.1 percent after
ending on Friday at its lowest since mid-November. But the
Shanghai Composite Index erased earlier gains and turned
negative in volatile trading after closing last Friday at its
lowest since August.
Hong Kong markets closed at noon on Tuesday for Christmas
and will resume trading on Friday. Mainland China's markets are
open through the week, as are markets in Japan.
U.S. stocks rose on Monday after data showed consumer
spending climbed to a five-month high last month, and the latest
consumer sentiment reading showed improvement. Despite the signs
of strength, inflation remains benign, with a price index for
consumer spending unchanged for a second straight month.
The Dow Jones industrial average rose 0.45 percent,
while the S&P 500 gained 0.53 percent and the Nasdaq
Apple Inc's distribution deal with China Mobile lifted the
technology sector, and Apple itself added 3.83 percent
for the day.
The U.S. economic reports prompted some analysts to upgrade
their forecasts for economic growth for the quarter, which in
turn follows upward revisions to the third quarter.
Investors chose to focus on the strength in consumption
rather than the benign inflation, and priced in slightly more
risk of an earlier hike in interest rates by the U.S. Federal
Fed fund futures were fully pricing in a move to 0.5
percent in September of 2015, compared to this time last week,
when futures indicated a November hike.
Government borrowing costs have also been rising even for
shorter-dated debt. Yields on two-year Treasury notes were
around 39 basis points, compared with a trough of 26
basis points last month.
Rising yields supported the dollar, but it still struggled
against its European counterpart. Many analysts believe the
relative outperformance of the U.S. economy will benefit the
dollar over time, but progress is proving to be glacial.
On Tuesday, the euro was buying $1.3681, down
slightly but still holding above last week's low of $1.3623. For
the year to date, the euro is still up nearly 4 percent against
Both currencies have fared much better on the yen, easily
the weakest of the major currencies this year as the Bank of
Japan remains committed to its massive stimulus campaign.
The dollar rose 0.1 percent to 104.19 yen after
hitting a five-year high of 104.63 yen on Friday, while the euro
was nearly flat on the day at 142.53 yen, also not far
from a 5-year high touched last week.
Among Asian currencies, the Thai baht fell to a
low of 32.80 versus the dollar, its weakest level since March
2010. Thailand's political turmoil grew as anti-government
protesters gathered on Sunday to demand Prime Minister Yingluck
In commodity markets, gold dipped below the $1,200 level to
$1,198.71 an ounce and was heading for its biggest annual
loss in three decades. It has shed nearly 30 percent so far this
year and is threatening the April 2010 bottom under $1,050.
U.S. crude fell 0.2 percent to $98.70 a barrel, off a
two-month high of $99.40. Benchmark Brent crude was flat
at $111.56 per barrel, with prices underpinned by a conflict in
South Sudan, which threatened its oil output at a time when
production cuts in Libya are already curbing global supply.